Video | Audio | Discussion
| References | Person | Text |
|---|---|---|
| # / 00:00 | Steven Becker | I was muted. Apologies. Rich, am I on now? |
| # / 00:06 | Richard Brown | Nope. We just started recording, so I'm gonna do the preamble and then I'll hand it off. Hello, everyone. Welcome to the Thursday, April 11th edition of the Scientific Governance and Risk meeting. I'm going to the same speech I do every single time, so I apologize if you're binge listening to this on SoundCloud, because you've heard it 28 times now. We're super excited to have the sheer volume of intellect in these calls and we want to make sure we leverage them as much as possible so if anybody here has a question, a comment, or an observation they wanna make, please do not be shy. Type your question in the chat and somebody, if you don't have a microphone, somebody will come along and hopefully identify that and read it out to the rest of the group. Or if you do have a microphone, feel free to interrupt because we do it to each other all the time. There's no reason why everyone else can't get in on that as well. |
| # / 01:02 | Richard Brown | We're going to talk about a few different topics today. One of them is we're gonna have an introduction by Steven for the general thought of the week. I'm going to talk a bit about how the poll went and some options for what polling looks like in the future, and we'll get into [inaudible 00:01:19] as we possibly can cause that's where the meat of the conversation is. And once we hear from risk, we'll have Q&A session and see if we can get to the bottom of this whole crypto money thing that we're all so interested in. With that Steven, I'm gonna had this off to you, and go ahead and join her up. |
| # / 01:39 | Steven Becker | Thank you. Firstly, hello everyone and thank you very much for participating. I think the turn outs that we've had over the past, what month to two months, has been fantastic. It really helps us to consider all the challenges that is posed by the MakerDAO system. Again, I'd like to reiterate like Rich has... there are basically three themes that we want to cover in these calls. One is the demand and supply dislocation. The other is collateral types, the collateral portfolio parameters and their adjustments. And the third is the exogenous risks to the system. |
| # / 02:16 | Steven Becker | Today specifically, I would like to thank the community members that have formed a working group. This working group is focused on sourcing data and presenting metrics that help us get a better sense of the MakerDAO system. So, to those guys that have actually stepped forward, thank you very much. In fact, we're gonna hear from one of them today. What I want to urge folks to do is listen carefully and from that take a leaf out of the page and see where you could possibly contribute as well. |
| # / 02:43 | Steven Becker | So, again, the theme that is still on our minds is the demand and supply imbalance. Obviously, with one eye on the speculation of ETH and the other one on the stability of DAI, we have a whole bunch of very interesting questions to answer. I mean, one such question is why create DAI from a CDP when the price of DAI is below a dollar? Something to mull over. Something we can chew on in this particular meeting. Also keep in mind while we figure out the answers to these questions, we've got to remember that this is a decentralized governance, or a decentralized scientific governance. We have to be thoughtful of the fact that we are facilitating ideas that are ultimately up to MKR governance to decide on. And considering that this is a continuous process, I will keep asking: Please keep as involved as possible. So, that's my little preamble as well. Thanks, Rich. Over to you. |
| # / 03:46 | Richard Brown | Sorry, you caught me off guard. I was taking notes. |
| # / 03:47 | Steven Becker | No worries. |
| # / 03:48 | Richard Brown | Actually trying to prepare for what you're just about to hand over. So here we go. I want to talk about two different things today. I'm going to make it as brief as I possibly can. I want to... let me back up one second. As a community, we're sort of... we're not sort of. We are literally iterating on what governance looks like, and that changes week to week. I'm encouraged by those changes, because week to week, the process improves. Here's sort of a picture of how the process has improved since last time. I want to reiterate some of the conclusions, or some of the support that was expressed in the subreddit about this new process and solicit some questions from the people here. Or comments. |
| # / 04:35 | Richard Brown | So, the idea is this, and I'm going to borrow liberally from a small manifesto I published in a comment thread last week. But after our last call, it occurred to me that we might have been falling into a bit of a rhetorical, or a cognitive dissonance problem where in the last few calls that we've had, it's become binary, the framing of our discussions. Where we'd eventually sort of narrow in on the discussion about whether the community is feeling hawkish or dove-ish, aggressive or conservative, and based on trying to identify the most ad-hoc sentiment analysis, coming up with a number that appropriately represents that sentiment. That was a complex process. |
| # / 05:26 | Richard Brown | So after the call, we had this long debate in the rocket chat, and it led me to making this proposal in the r/MKRgov subreddit that proposed instead of us trying to determine as a group what signals we are identifying and what signals we need to acquire from a wide range of potentially unidentifiable people, what we can do instead is move into a process of continuous polling, as opposed to determining whether a poll is required. This continuous polling process is fairly standardized, and that makes the mechanics on our side a lot easier, and it makes predictability for the outside world a lot more understandable as well. |
| # / 06:15 | Richard Brown | The idea is that every Monday, we will enter a new governance poll into the system, and that governance poll will contain a default range of options... Of stability feed options to choose from. Great. Now that seems to be 100 bips from zero to five...to four, sorry. As an increase for the following week. Then, we allow the community to determine which of those options they find most palatable. When we come into this governance call, we review the results, talk about any other issues that might have cropped up during the course of the week. We'll review numbers and then that leads to an executive on the following Friday. This weekly cadence is... at that point, it becomes sort of this loose framework for forward guidance, as well. It's a great way for the community to figure out which way the wind is blowing. The external crypto community can understand which way the wind is blowing inside of MakerDAO. Inside of the community, I mean. It lowers the friction. The technological and bureaucratic friction involved with a bunch of people in the organization sort of scrambling to come up with, like I said, sentiment analysis, collecting signals, and trying to be as agnostic as possible in these processes. |
| # / 07:36 | Richard Brown | But we're humans, and that's not possible, no matter how tricky... Or how much effort we put into it. So, the idea now is that every week, a poll comes out with the same options. Community signals, and then the community chats, and then the community votes, and then we just do that until what I'm assuming is some point in the happy, happy future very soon where we all determine that this is slightly onerous and no longer required. Maybe we stop the cadence until there's a peg deviation that needs to be addressed. Or obviously... this is a trap that we can't fall into... the crypto world is never going to...is not going to look the way it does right now in perpetuity, so it's entirely possible that in a month or two, we need to start presenting negative options on a weekly basis for a stability feed decrease. And that's the plan that we're looking at right now. |
| # / 08:30 | Richard Brown | That was a bit of a speech of mine, so I want to stop here and... There's my buddy Aviv with a question, so if somebody has any comments, questions, tweaks, improvements to the process, I would dearly love to hear about them. Aviv, did you want to ask whatever you just typed? |
| # / 08:49 | Aviv Milner | Yeah, sure. I'm just curious if there's anyone who thinks that that spread might not be ideal. Just because we have to ask this question: Where is the equilibrium stability fee? The equilibrium stability fee is somewhere high, like 25 or 30%. We heard some people talk about that they think that it could be quite, quite a bit up there. I personally don't intuitively feel that way, but if it is at 30% and we're limiting ourselves at a 4% increase, it means that it'll take us about a month to get there. |
| # / 09:23 | Richard Brown | Yeah, that's a great question, and one that I do not have an answer to. Yeah. I guess I wish I could say that we have science that shows that this percentage of people are calm and considered and evaluating the data when it comes to stability fees. The increases in this percentage are just potentially more reactionary. I think there might be a risk there that the market takes a quick downturn and then people start pressing the 30% increase button, but I'm not sure. I think that it would take some of the analysts in this call and some of the risk managers in the call, and maybe some of the fund managers to present a range over time, or a rate, I guess. A rate of rate increases that would make sense for the community. And then present that back to us. That would be the ideal situation. |
| # / 10:23 | Richard Brown | Did that halfway answer your question, Aviv? |
| # / 10:27 | Aviv Milner | Yep, yep. No, I agree. |
| # / 10:29 | Richard Brown | The fact that I don't know. Does that answer your question? All right, so I want to get some... Or at least I want to give the opportunity for people to comment on this idea of a weekly standard cadence, and whether they feel that this might be too onerous. And that's flexible enough, whether it doesn't identify issues, or whether it's just completely peachy keen. This is what we should be doing. |
| # / 10:54 | Cyrus Younessi | I have a couple comments on the governance. |
| # / 10:56 | Richard Brown | Sure. |
| # / 10:57 | Cyrus Younessi | So, I think we've been very fortunate in the past that we've had kind of a convergence in ideas between this governance call, Reddit, social media, and the governance...the official governance poll, at least in the past. But I think this last week was maybe the first time where we saw a bit of a divergence where it seems like the call we had last week and the governance poll were in line, but Reddit seemed to go the opposite way there. The kind of general sentiment there was... If we had listened just to Reddit, we'd be talking about something completely different. First off, I think decentralized governance is hard, and there are obviously...This is obviously a big topic of contention in the wider crypto-community. Bitcoin governance versus Ethereum governance, and now we have our own flair of MakerDAO governance as well. There's been a couple comments on... is our style of governance too centralized? If we have few large MKR holders kind of swinging the governance poll or the executive vote one way, what happens? Is that good or is that bad? |
| # / 12:17 | Cyrus Younessi | I just want to kind of bring up so it's on people's minds that we might run into a situation where we can have a really great call on the weekly call and have really great Reddit conversations, and then the governance poll is the complete opposite. Or the executive vote is the complete opposite. So, just something to mull over for everyone as they think about governance. I will... my personal opinion is that MKR holders are the only one with skin in the game. You know, they have capital at stake, so that definitely... me personally, I'm not worried. I've kind of been around the crypto circuit a little bit, but I know that this could be an issue when things start to diverge hard and we saw a small glimpse of it this week. |
| # / 13:07 | Richard Brown | Yeah, I agree, and I think that this... there's a couple different sort of meta issues going on. One of those is governance is hard, and it's always been hard, and it will always be hard. There's no magical algorithm coming to save us. Crypto or blockchains are not. We also are going to see this push and pull of stakeholders. Humans have a tendency to pick camps, and so we're gonna see camps more. I think a lot of these things are risks that we should all be prepared to understand, I think. This is kind of a meme that I've been trying to repeat in conversations as much as I possibly can. But from my perspective, governance isn't a problem to be solved. It's a problem to be handled, as elegantly or sophisticated or as fairly as possible. But it's not something that goes away. I've been in co-ops for many years, and this is precisely the way governance looks. |
| # / 14:05 | Richard Brown | It's good that you raised those issues, particularly because this is another kind of meta consideration that we need to take into account is that as humans... excuse me. We're not really good at separating signals, but we are very good at identifying patterns. In the same... well, it should come as no surprise that I've seen the same thing, because I've been on a tear in the subreddits for the last two days. But I got the same impression. It's interesting that we see the same volume of people that are like, "You guys are burning MakerDAO to the ground because of blah, blah, blah." As I dug into this, it occurred to me... Well, it didn't occur to me. I did some counting. There's only five or six people that are sort of repeating that same message out of potentially hundreds of commenters. It's easy to come away from one medium with a distinct impression that this is the general consensus and then hitting another medium and finding a completely different general consensus, which is-- |
| # / 15:04 | Cyrus Younessi | And it also emphasizes this notion of scientific governance that we've been trying to instill in the community, and not emotional governance. There was quite a few people that were all of a sudden very concerned for MakerDAO's reputation, and its growth, and its adoption. And I think it's important to realize that the primary driver of our growth and adoption is stable...it's a stable DAI. Stable peg. |
| # / 15:34 | Richard Brown | Yeah, and that's actually the message that... There's been some really great responses in the subreddits as well. Very considerate, very well-thought-out, and backed up with data, and all the rest of it. A line with my own personal thinking on this matter, but I'm heartened by the fact that there seems to be from my perspective... And I just caution against people saying that they found a general consensus or an understanding, but this is the one that I've personally have chosen for my own biases, but the large Maker holders that I've seen or spoken to seem to have this very clear understanding that the success of this system hinges specifically on the stability of DAI. There is no short-term gains to be made here. There's no secret game of theoretical conspiracies afoot. The only thing that matters is that long-term stability of the DAI is better for every single actor in this ecosystem. I'm hoping that that's a message that keeps on getting put out there. |
| # / 16:41 | Richard Brown | I feel like I've kind of gone off-script here a bit, so I want to make sure that we don't lose the conversation about the polling system. Has there been any questions in the chat there about the polling system, or did... do we have like another thread happening here? It looks like a new thread. So with that, I'm going to... I was hoping to come up with some pie charts for everybody to show how the governance system...usage of the governance system has increased over time. My Python script broke last night, and so I do not have those. So, I'm just going to kind of talk about numbers. |
| # / 17:15 | Richard Brown | Obviously, anybody who's had a look at the voting portal can see that there's overwhelming support for a 4% increase. It has... it's not even worth actually coming up with numbers. I'll call it 90. I'll post something in the subreddit later on today that actually has the breakdown. But we've seen not only an overwhelming support for a 4% increase, but we've also through stake weight but we've also seen an overwhelming majority of voters that came out selecting that as well. Another great range of whales and...I can't remember what the other classifications are... all the way down to krills voting for the 4%, which is great. I want to continue to see that, because this is something that we talked about a few calls ago. Signaling here is paramount. I've done it myself, and I did it myself this time. I am a krill, so even if you're not going to move the needle, getting out there and signaling that you're in support for any one of these options is an amazingly important data point. |
| # / 18:25 | Richard Brown | We need to know whether 90% of the stake weight is on one option, but 90% of the individual voters are on another option. That signals that there's something that we need to address. Even if you're not going to move the needle, please vote. Anyway, so that's another little speechifying. |
| # / 18:44 | Richard Brown | We saw 64 voters in total signal for the 4% increase. [inaudible 00:18:49] is the vast majority of the stake weight, as I've already stated, was 50,000 Maker placed into that polling option. I think that this is potentially one of the records for voter turnout, so this is... that comes back to my "week-over-week incremental improvements are good enough for me" speech. So, obviously, apathy is being combated here, and we're seeing more people engaging with the system. What happens now is that we get to talk about... we could talk about the way that the vote shook out and what the implications are in the Q&A session, but ultimately what happens next is tomorrow at 9:00 A.M. PST and 4:00 P.M UTC. An executive poll will go out. The options... sorry, it's continuous approval voting, so you signal your support for the existing picture of the system, or voters will signal their support for the new picture of the system, which will include a 4% increase, for a total of 11.5% stability fee. |
| # / 19:58 | Richard Brown | There was a rash of questions in the sidebar. David, are you keeping track of this? Is there anything that needs to be asked? |
| # / 20:07 | David Utrobin | I'm loosely keeping track of it, but there's nothing in particular... well, what if two options have almost equal numbers of votes in the governance poll? But I think that the answer is that is basically just a repeat of the poll. |
| # / 20:20 | Richard Brown | In the polling system? Yeah, this is something that we were discussing when we were considering this continuous polling option and having a wide range of options. Are we going to dilute the signal? @nkpine, our sage wizard who whenever he speaks it's worth listening to, has pointed out that there's some interesting behaviors that we can start looking for in that model, and...because people can change their votes, or re-stake their signals whenever they want, the assumption is that that stake people begin to capitulate. If there's a wide distribution, then over time, people will begin to aggregate into their next-best options. How well that works, I'm not entirely sure. We haven't seen it in action yet, but nobody's locked into a vote. After they vote, they [crosstalk 00:21:14] |
| # / 21:14 | David Utrobin | Yeah. Another good question from the chat was from Michael Dunsworth about what the goals are short-term, mid-term, long-term that we have in place to evaluate the execution's success and failure, and whether we've formally defined those, I guess. Yeah. |
| # / 21:30 | Richard Brown | It must be hard for you, because you can't do emojis in this chats. It must be a struggle. Do you want to ask that question or give us some clarity on-- |
| # / 21:38 | Michael Dunsworth | Sorry, yeah, no. I can't do emojis, which is a bummer. But yeah, no, guys. I think a lot of people are getting hung up on voter turnout and stuff. To be honest, the scale that MakerDAO is at, people... It is the biggest indicator of success when nobody turns out to vote, because you're only going to vote when there's misalignment. Alignment is everything. Right now, the reason why I go back to goals is because no matter how long I want to argue with the person sitting next to me, I can do that all day. But if there's no North Star that we know of, whether that's... Look, the big goal is stability and all that stuff, but you might say the execution strategy for the next three to six months is to let the peg slip and re-manage expectations that it is a soft peg within 3-5%. And the goal is to reach one-to-one over the next three or five years, when there's a billion people in the space, instead of right now. I just think there's a lot of sort of... there's not really much clarity around what the goals are, short, medium, and long term, because that's going to affect the total execution. Unless the goal is right now only to have a one-to-one peg, but it's going to break in two years, or it's not scalable. That's a lot different. Do you know what I mean? And I think that's-- |
| # / 23:05 | Richard Brown | I think I'm-- |
| # / 23:05 | Michael Dunsworth | --there's a lot of-- |
| # / 23:07 | Richard Brown | --I think I'm catching up to you. That's going to be super hard for a lot of reasons. A lot of people need to agree on a public... a forward-facing statement like that, which would be an adventure. What's the utility of it? This is the part... Sorry, are you saying that it creates an expectation or would raise some consumer confidence? Like 2% either way is a fact of life, or 1% is the goal? |
| # / 23:33 | Cyrus Younessi | I think he's saying... are we, in this early stage, trying to prioritize for DAI growth, CDP growth, user growth-- |
| # / 23:41 | Richard Brown | Well actually-- |
| # / 23:42 | Cyrus Younessi | --diversity of adoption. What is the overall MKR business strategy? If I'm interpreting it correctly. |
| # / 23:51 | Michael Dunsworth | Yeah, well I mean [crosstalk 00:23:52] are going to everything. Because you could make it stable for the next... you could make it $1 for the next week and if the goal is to have it be $1 to $1, or stable in five years' time, the building blocks that make that happen are much, much different than a lot of the things that we're sort of trying to throw at it, basically. Yeah, sorry. |
| # / 24:18 | Richard Brown | Fair enough. I can speak to that specifically. I'm glad that you brought it up, because this is sort of a recurring meme as well. The short answer, and it's going to sound glib, is we're doing all of that. And here's the explanation. There's... because people are so... especially in this venue are so hyper-engaged with risk parameters, the peg, voting, it's easy to get into this mode of thinking that MakerDAO is obsessed with the stability fee and the peg is 90% of the activity now to MakerDAO. I can assure you that that is not the case. |
| # / 24:57 | Richard Brown | MakerDAO is large and complex, and there's a lot of people working their little fingies to the bone to achieve all those goals that have been just listed out. So we have a fantastically successful business development department that's going out and building business relationships and partnerships. I'm hard-pressed to find anyone in the industry that has more real, tangible partnerships and initiatives than MakerDAO does, so much so that we've had to sort of scale back on the amount of announcements we make because it's too much. It's exhausting. We have departments of people that are increasing demand on the demand side with real use cases. We have a grants program, which is generating grassroots onboarding education and tooling in the global space. We have a series of... well, I don't know if I should be listing off every department in MakerDAO. The very aggressive marketing and PR departments are generating content. It's easy in this venue to think that, "Hey, MakerDAO is playing with one lever and they should be trying to convince people to use DAI." It's important to remember that that's exactly what we're doing. There's no binary critical path here. There's developers furiously working on multi-collateral, business developers furiously working on new partnerships... The list goes on and on and on. |
| # / 26:29 | Michael Dunsworth | Totally. I just think yeah... maybe any kind of clarity around goals and stuff like that is going to... I know you guys are executing like crazy and all of this stuff is a function of... it's a result of actually... teams graduate to this problem. But yeah, there's a lot of stuff that I feel the golden place which everyone can either... people basically need to get behind. And yeah. That's all my suggestion with any kind of clarity on that. But, thank you very much. Appreciate it. |
| # / 27:06 | Richard Brown | No, I love that. I'll make sure that's called out specifically in the summary post in the discussion thread, because this is... I think you've identified something that needs to be discussed over a series of calls and hashed out. Let's do that. Let's figure out what the short, mid-term, and long-term goals are, at least from the community's perspective and see how we can get that to inform the foundation as well. |
| # / 27:27 | David Utrobin | Yeah. Also, there was a good question in the chat, and I've seen it asked in Reddit a couple times, too. It's about the frictions about learning that a vote is happening, or getting set up to vote. I think it's a question basically about notification for MKR holders. |
| # / 27:45 | Richard Brown | Yeah. That's another great question. That's a two or three-pronged approach at this stage. The voting portal is a tool that's being rapidly iterated. It doesn't look the way it did when it launched. It's new and improved, and there's an even newer and improveder version coming in the next month or so, which will facilitate...It'll increase the notifications across our properties, so people know when they visit a MakerDAO site that there's a vote happening, or a risk parameters change. We'll be adding potentially some... I'm not going to make promises for the UX people, but some tweaks that allow a more efficient selection of ranges, particularly on these pollings, so we don't have to click through eight different pages. There will be some additional audit trails so people can look through the history of the votes, particularly with the executives, because the UI just isn't designed for that right now. So there's a significant number of improvements that are coming for the voting portal itself. |
| # / 28:45 | Richard Brown | The second question, though, is one that I'm fascinated with and generally have been tossing it back to the community to give us some suggestions, because it's kind of a hard problem to solve. How do we... We know how to do polling data so people can just come to the site and see what's going on, and they can come to any one of our socials and figure out, hopefully, what's going on. How do we push notifications to people? That's a significantly harder question to answer, because we don't know who holds MKR. We don't have their email addresses or their Telegram handles. It sounds like a bit of a cop-out, but I would love for people to suggest the ultimate solution to us. I don't know what we can do to solve this problem other than getting everybody to sign up, or something. |
| # / 29:33 | David Utrobin | Mike just mentioned in the chat that him and his group are working on a notification standard. |
| # / 29:41 | Richard Brown | All right, well Michael Dunsworth will save us. There's your answer. That's been my secret belief for years now, so happy to see that that's the case. I just realized that I've monopolized the meeting. I was hoping to talk for five minutes, and it's already 9:30, so it's desperately important that we hand this off to risk at this point. Cyrus, can you provide us with some pretty graphs and numbers? |
| # / 30:02 | Cyrus Younessi | Yeah. Yep. All right. I'm sure as you all know, the DAI peg has continued to be weak this past week. Pretty much as weak as it's been. It's hovering a lot around 96 cents. After last week's brief surge up into the 97-98 handle, saw that drop off pretty quickly. DAI supply started to trend back up as the ETH price continued to go upwards. We had that one day where we had a lot of wipes, and we saw supply starting to shrink, but that was very quickly reversed. We just saw a lot of borrowing. A lot of weakness in the DAI price. This is pretty much it for this. I'm going to actually pass it off to Vishesh, who is also going to present a series of data, and then after that we can kind of jump in to all of this and talk about everything. So, let me... Vishesh, are you ready to... |
| # / 31:31 | Vishesh Choudry | Yeah. I'll take over the screen. Okay. So, yeah. All in all, a fairly interesting week, actually. So, I'll just kind of run down the basic state of the union update, and then dive in on a couple of interesting things. |
| # / 31:56 | Vishesh Choudry | So, as Cyrus mentioned, the DAI price has kind of suffered. One of my concerns is the peaks and the valleys. Both have kind of been trending down over the past few months, which seems like a more long-term trend. I know we've been talking about a lot of the problems with DAI as like a shorter term problem, but this is interesting considering the next graph, which is...this kind of consistent trend has happened both in times of decreasing and increasing ETH price. So that's just something for us to unpack at some point |
| # / 32:39 | Richard Brown | Vishesh, for people with bad connections, can you describe what graph you're looking at? That's the ETH volume price, okay. I missed a couple of them. |
| # / 32:42 | Vishesh Choudry | Sorry. I'll go a little slower in case connections need a second. So yeah, the first graph here is the DAI/ETH trading volume, and the VWAP price. There's been pretty significant volume in the past week or so, and it's actually sustained higher, even though the price has been falling significantly, so that's potentially something to be concerned about. Then, the next graph was ETH price and the DAI price. So what's interesting here... sorry, I can't see chat comments if people are commenting, so just let me know if there's questions... So here is the ETH price and the DAI price. I mean, as has been mentioned before in these calls, there is a fairly consistent kind of negative correlation between these two things. As the ETH price runs up, I think we tend to see either people take that as an opportunity to draw more and hold onto riskier loans, or as an opportunity to go ahead and leverage further on ETH and in the process sell DAI for potential U.S. dollars to purchase more ETH. |
| # / 34:03 | Vishesh Choudry | So, here, which is one of the interesting things. I'll double-click on the DAI that's been minted and burned, and the supply. March 22nd was the last stability fee increase, so what was interesting is that... Obviously, there's a little bit of rundown leading up to that increase. Probably people burning in anticipation of experiencing a higher rate, which is something that I think we tend to see people do around stability fee increases. But then basically, in the week after that, this started to recover and run back up. So, supply increased and the increased stability fee was not a significant enough deterrent to prevent people from drawing more DAI. There was this one day where there was a bit of an uncharacteristic peak in wipes, but that was I believe due to one large CDP. But then in the few days after that, it started to run back up again. And then it basically crossed back up above the supply level before the...or at the time of the increase. So, clearly, to me, that says that the 7.5% was not a significant enough deterrent. |
| # / 35:19 | Vishesh Choudry | What is interesting as well is... And here you can see transaction volume overall. I already zoomed in on this. So this is transaction volume. Transaction volume has actually been pretty significant, as well, in the past week or so. Vast majority of it has been non-burn and wipe transactions, so transfers. I think there is something interesting that we can double-click on at some point, in terms of where these transactions are going. Again, my suspicion, given what's been happening with the price, there's been a fair amount of off-ramping to U.S. dollars. That's a little bit hard to show. |
| # / 36:01 | Vishesh Choudry | So, back over to... One of the interesting data points for this week is the... and there's a conversation thread going on around DIPOR and what do we learn from secondary lending platforms' interest rates, supply... Borrowing supply volumes. So here, what we've seen is a jump, actually, in the borrow and supply rates on Compound, just this morning to basically the level of the current stability fee, or almost to that level. This was actually an extremely surprising data point, in the sense that these kinds of jumps have not really happened before in the history of the Compound interest rates and certainly not before the stability fee increases. They tend to kind of line up or follow. |
| # / 36:57 | Richard Brown | Is this an organic equilibrium being achieved, or is this the results of somebody just borrowing a million dollars' worth of DAI, or something? |
| # / 37:07 | Vishesh Choudry | I have not-- |
| # / 37:08 | David Utrobin | [crosstalk 00:37:08] in data points saw there was one big CDP that mentioned in our Maker rocket chat, that he had paid back a million DAI to the CDP portal and borrowed it from Compound. So actually, what Rich mentioned might be a really great point. |
| # / 37:24 | Vishesh Choudry | Okay. Yeah, and it's good for us to adjust in terms of whether this is one big CDP just driving a lot of activity, or multiple different users. But we did see that kind of corresponding jump in borrow volume, which does explain the jump in rates. And not much to say in terms of burns, and wipes, and bites recently. But, one thing to note was the collateralization ratio. Over time, we've kind of seen the collateralization ratio hold steady in the 300s and kind of run up a lot recently with the increasing DAI price, obviously. But what's interesting is that had actually started to level down a little bit in the last couple of days. With the DAI supply going up and the collateralization ratio kind of coming down a little bit, we're seeing less...more tolerance for risk, I suppose I would say. Which kind of makes sense with the increasing ETH price. I think people tend to get bolder with their CDPs as mentioned, as the ETH price runs up, which is kind of what leads to some of the depressed DAI prices, I think. |
| # / 38:47 | Matthew Rabinowitz | Do we have any data that shows for the newly-minted DAI, if those are from new CDPs or from legacy CDPs? Do we know that? |
| # / 39:00 | Vishesh Choudry | I don't have that offhand. That's something that I could add. |
| # / 39:06 | Matthew Rabinowitz | I think it could ultimately demonstrate some really interesting color, in terms of people's sensitivity. You mentioned as the price hasn't gone up, or when the stability fee was 7.5%, that that wasn't enough to deter. Well, you don't know necessarily that that's from new CDP builders or-- |
| # / 39:27 | Aviv Milner | Sorry. By the way, someone in the rocket chat says that 90% of the Compound borrowing is him, or her. Just point that out. |
| # / 39:37 | Richard Brown | Yeah, I think that we've... that kind of loops back into the question I meant to just ask and Vishesh's presentation is that... This is probably a series of data points that we need to start adding to our graphs. It loops into the chain analysis discussions that we're having with various different organizations that provide those numbers. But the age of the CDPs that are reacting to a stability fee increase is interesting. The volume of those wipes and/or draws is interesting as well. And the number of people affected, because it would be very... I think we've already seen it, but it would be nice to have some hard data that shows that just like the rest of the crypto space, potentially, it's like two or three large people moving the rest of us unintentionally. Or unwittingly. |
| # / 40:31 | Richard Brown | All right, thanks for that, Vishesh. That was great. Did anybody have any specific questions about the numbers that he presented there? All right, we have this really active conversation happening in the side chat, as well, and I-- |
| # / 40:46 | David Utrobin | Yeah, it's mainly about the debt ceiling. |
| # / 40:49 | Richard Brown | Yeah, I know, and I don't want to jump into it just yet, until we've determined... Cyrus, did you have anything else for us today, or-- |
| # / 40:55 | Cyrus Younessi | No, I think we can just... yeah I think we can just kind of jump into... I mean the conclusion is basically too much DAI supply. |
| # / 41:05 | Richard Brown | Yeah. In a nutshell. All right. So we have 45 minutes left. I'm going to block off the last five. So let's get into some questions |
| # / 41:14 | Cyrus Younessi | Did you say we have 45 minutes left? |
| # / 41:16 | Richard Brown | Sorry, yeah, I probably did. But that's not what I meant. We're at 45 minutes after the hour, so we have 15 minutes left. The last five minutes is going to be for a recap, so let's try and get some questions in while we have a chance. We have... just to frame a discussion, we have essentially with Single-Collateral DAI, we have a single weaver that we're playing with right now, and that's... The stability fee with Multi-Collateral DAI will have a range from collateral portfolio diversification to the DSR to a wide range of synthetic assets, potentially. Eventually. But there's sort of this recurring question about whether in fact we do have an additional lever in Single-Collateral DAI, and that lever could potentially be the debt ceiling. We've gone back and forth on reasons why that might be a good idea or might be a bad idea. I am not a financial wizard, so I'm not going to make any predictions about that, but maybe Cyrus you can... or Steven, actually. With the risk framework knowledge embedded in your head, you might be able to provide some clarity as well. |
| # / 42:26 | Richard Brown | Maybe we can start off with just a really brief discussion of what the debt ceiling is meant to do and why it's there, and then we can break off into how it could potentially be reconfigured for other reasons. |
| # / 42:39 | Cyrus Younessi | So, I mean the way I look at it and feel free to disagree, is that debt ceiling should primarily reflect the extent to which MakerDAO is willing to provide to generate DAI off of this collateral. That should kind of be constrained by the liquidity of the underlying asset. Just very qualitative-type features and its trading profile. Not necessarily used as a mechanism to adjust supply and demand. And the way I think about it is... Let's say the debt ceiling were to just immediately be dropped down to like $50 million, or whatever. And let's say that precluded the need for stability fee increases. There's sort of two arguments for why people want to drop the debt ceiling. One is people want to do it in parallel to accelerate the DAI price, and the other is people want to do it in lieu of a stability fee increase. Because they're kind of not happy with the increases. |
| # / 43:49 | Cyrus Younessi | To do it instead of, I think, is not a great idea. And I want to be cognizant of time and don't really want to get into that right now. I think doing it in parallel could be something to consider and discuss. At the same time, given what I said about my view on its function, I'd be interested in hearing other people's opinions on... you know, couldn't we achieve the same effect by more aggressively raising the stability fee? |
| # / 44:22 | Richard Brown | Yeah, I'd love to hear that as well, because I keep on reminding people I'm a financial neophyte. I think that we have an idea where we guess what would happen if we allowed the community to...or the ecosystem to hit a debt ceiling. But we don't know, because we haven't tried it. Not knowing what will happen despite that makes me nervous. If we have some deep thinkers in the call that have given this some thought, I would love for them to get on the microphone and actually offer some suggestions or opinions about that. Matthew, do you have a mic? Matthew Light? |
| # / 44:58 | Matthew Rabinowitz | Yeah, I would say that when you're starting to play with a tool, DAI. Its major value as being a stable coin is because it's not an IOU coin, it is using market forces supply and demand to drive its value. When you start using artificial tools to cause it to sway up or sway down... The best example, to just picture in your mind, is just imagine a ship that kind of runs aground. Yeah, its normal level where the waterline would be is all of a sudden higher, but you're using an artificial tool to cause it to be there. The question is not what would happen if you hit the ceiling. That part's kind of obvious. The question is what happens when you're no longer hitting the ceiling. You now have to rely on market forces to kind of recoup your artificial mechanism to cause it to go temporarily higher. How does the system handle that, when you kind of let go of the ball and it drops? That's just extra risk to take. |
| # / 46:09 | Matthew Light | I guess I would say my concern right now is we're at 95 cents, and my concern is that you can have a big dislocation. You can very easily go from 95 cents to 80 cents, or even lower, in spikes. And I think those dislocations would be damaging for the reputation of DAI. So I would say at 95 cents, we're in a pretty emergent situation regarding the long-term reputation. For me, I'm not so much worried about what's going to happen down the road. We know we've got a tool coming that's basically going to take care of demand. Right now, we don't have much organic demand for DAI, but when we can pay people 10% interest rate if it needed to go that high, then we can get people to hold DAI in that case. But we don't have that now. All we have is raising rates and the debt ceiling, and I think both of them should be used. Presumably, we're going to have MCD in a few months, or at least within the next half-year. And there, we can use more appropriate tools. But until then, I would say we should consider using all the tools we have. Not at 99 cents, not at 98 cents, but here at 95 cents, that's my view. |
| # / 47:51 | David Hoffman | I think I'd like to chime in here. I think the... There's always this organic demand for DAI, and that's some amount that we don't really know, and it's probably lower than we all really want it to be. So this organic demand for DAI is in like dYdX, or other platforms like Augur have organic demand for DAI. Remember DAI is locked up. I think DAI lock-up is going to be a really good metric in the future to really kind of provide a price floor for DAI. We want this more organic demand for DAI to be proportionately large compared to the total outstanding supply. So when it comes time to talk about the debt ceiling, I think we should consider what ratio of organic demand for DAI is to the total outstanding supply for DAI. When nine out of ten people are leveraging long Ether to generate DAI, that's making DAI supply... Nine DAI for every ten is just like leverage long DAI and not demand for DAI. So if we lower the debt ceiling, we are proportionately increasing the part of the DAI supply that was created by organic demand. If that makes sense. |
| # / 49:00 | Richard Brown | Well, that raises an interesting question. You talked about determining how much of the DAI supply is just used for levering up, but what are the other ways that we can use to determine what organic demand actually is? I don't know. |
| # / 49:14 | David Hoffman | Well, we can take all platforms like dYdX that has DAI locked inside of it, and we could calculate that supply. And that would be some metric that would be helpful. |
| # / 49:28 | Richard Brown | Yeah, I suppose. At least we would have a general sense of whether the primary use case is collateral or lock-up in other DeFi apps. All right-- |
| # / 49:40 | David Utrobin | I have a general question about using the debt ceiling as a policy tool, right? Imagine we lower the debt ceiling, and so wouldn't we have an indicator of when we're going to be sort of at the expiration of that move, just judging by the market maker inventories? For instance, as the market maker DAI inventories shrink, that would signal to governance that we can now raise that ceiling and then there would be some run time there for that imbalance to happen again, really. I'd love to hear anybody's thoughts on that. |
| # / 50:15 | Cyrus Younessi | I mean, market maker inventories are not the only determinant of whether the DAI peg... the stability fee needs to be adjusted one way or another. |
| # / 50:33 | Vishesh Choudry | So I do have a quick question. Regarding the market maker inventories? So let's say the price drops and market makers decide to dump inventory, or let's say we lower the ceiling and that eats into market maker inventory. What happens? Have we thought about this? What happens to the ecosystem for obtaining DAI when market makers are not really arbitraging and there is a bit of a liquidity crunch on DAI? Do we have thoughts on what happens to the price of DAI or the supply? |
| # / 51:09 | David Utrobin | I mean, my personal thoughts is that as market maker inventories shrink, the price of DAI to its peg is kind of restored in that process. Then... You know what? I'm actually going to pause my thought here, because I want to think it through before I say it. |
| # / 51:30 | Vishesh Choudry | The reason I brought it up is because there maybe be some merit to considering the idea that having lower liquidity for DAI would actually drive up the price of DAI and increase the value on the premium for the CDP holders that are actually taking the trouble to draw it out, and then provide that liquidity to the market. So maybe it is possible that it's actually a potential problem that the market makers have had this inventory of DAI and have been eating up that spread, in the sense that maybe that's pain that the market should have been feeling to help keep the price of DAI at a more healthy and stable level. Because if that... If those market makers have significant inventory, and the price of DAI is depressed, that reduces the potential confidence. I think it was Matthew that mentioned this in the chat. Hitting levels like 95 and consistently following those levels down is a legitimate concerning point, I think, for DAI. Because we don't want people to lose confidence in the idea that DAI will someday return to the peg, or close to the peg. |
| # / 52:38 | Richard Brown | All right, that's an amazing question, and it's obviously something that needs to be explored, so I've just posted a link to the comment... or, the discussion thread for this call. Sometime in the next hour or two, I'll be reviewing the video and providing a summary in that thread. But if people have questions and they want to continue this discussion right now, feel free to jump into r/MKRgov into that link that I posted, and make sure that your questions are answered and that we maintain some velocity here. We have three minutes left, though, unfortunately. We need to wrap this up. Lots of people have hard stops. So Steven, did you want to leave us with the thoughts, or a summary for us? |
| # / 53:18 | Steven Becker | Well, yes I did. Firstly, thank you, everybody. I was watching the number of participants in this call, and it was just skyrocketing. This is exactly what this call is for: to facilitate these kinds of minds to contribute towards creating what we need, but at the same time being cognizant of the fact that we need to keep the momentum going. We need to make sure that this very small one-hour window is actually a part of a broader perspective in keeping this momentum going; keeping the voice going; keeping the governance going. So again, thank you very much for participating. And also, keep in mind. I'm going to say it again and again. This is part and parcel of decentralized governance, where what is very important to realize is it's the Maker community and it's Maker governance that ultimately has decision on what happens. So, that's it for me. Thank you very much. This was really great. I really appreciate it. |
| # / 54:20 | Richard Brown | Yeah, it was excellent. So thanks, everybody, for your great questions. Summaries will be coming. Audio/video links and transcripts will show up in r/MKRgov. And let's keep this thing cooking. Look forward to the executive vote for tomorrow at 9:00 A.M. PST, 4:00 P.M. UTC. Come help us shape the future of MakerDAO. Thanks, everybody. |